This article was reproduced with the kind permission
of the British Broadcasting Corporation
30 November 2007, 15:59 GMT
Paving slabs were used to break down the door then other neighbours formed a human chain to pass buckets of water.
Some even went into the building and more than 50 neighbours rallied to help the family in Highfields.
Fire service officials praised the neighbours' actions, but warned the public not to enter burning buildings.
Fire broke out at around 0100 GMT on Friday at the house in Sutherland
Witnesses said they saw two children being caught as they dropped from upstairs windows, then two adults rescued the same way.
After being told there were still people inside, neighbours used paving slabs from nearby roadworks to break the door down.
When they arrived firefighters using breathing apparatus to rescue the remaining four people still inside.
They had to stop two adults jumping from upstairs windows.
Five adults and three children aged four, six and eight were taken to hospital suffering the effects of smoke inhalation. Some had minor burns.
Dave Glenis of Leicestershire Fire and Rescue said: "The neighbours were fantastic.
"There is a word of caution from us, though, I don't want to be a killjoy but we actually would say to people whilst they got away with it here, we would say 'get out, stay out and call the fire service out'."
The fire is believed to have been caused by an electrical fault.